Weekly Wrap: Major bank sells NZ medical insurance business

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Weekly Wrap: Major bank sells NZ medical insurance business

Major bank sells NZ health insurance business
ANZ has announced that it has sold its medical insurance book in New Zealand to nib.

The deal, worth $22.6 million, is subject to regulatory approval from the Reserve Bank of New Zealand which is expected in December 2015.

The book, under the New Zealand OnePath Life brand, has approximately 20, 000 medical insurance policies covering 44, 000 people and there will be no changes to existing policies and nib will honour all current terms and conditions, ANZ said in a statement.

The medical book is worth approximately NZ$27 million for the twelve months ending 30 June 2015 and the deal will see nib offer cover to 15% of New Zealand’s insured population.

Nib’s managing director, Mark Fitzgibbon, said that the acquisition fits with the company strategy of New Zealand expansion.

“Since acquiring TOWER New Zealand’s medical insurance business in November 2012, we have been investigating a number of growth opportunities in the New Zealand health insurance market.

“The purchase of OnePath Life NZ’s medical insurance business meets our strict investment criteria, and importantly provides us with additional scale and scope to grow and leverage our existing New Zealand operations.”

ANZ Wealth New Zealand managing director, John Body said that the sale will help the company focus on core businesses.

“Medical insurance is a specialist business and this sale will enable us to focus on our core life insurance business with minimal impact on policy holders.”

NZ insurer’s strong ASX debut
Credit surety and financial risk insurer CBL Corporation has enjoyed a successful debut on the New Zealand and Australian stock exchanges, following an IPO which raised $125 million which will be largely used to fund the company’s ongoing growth.

CBL managing director Peter Harris said he was pleased with the depth, spread and quality of investors attracted, despite a period marked by volatile markets.

He said: “[We had] particular support from investors in New Zealand, Australia and Hong Kong. Equally pleasing was the strong demand for shares from our employees and key business associates around the world, which we see as a ringing endorsement for the company’s prospects and performance.”

Harris said about three-quarters of the new money raised by the float would be used to fund growth opportunities, including the recent acquisition of Australian insurer Assetinsure.

While growth was the target, Harris said the company would still take a measured approach.

“We focus on profitable business, we’re not driven by top line revenue. In face we’d rather do less business and make more profit,” he told Radio New Zealand.

He said the nature of being a public company would mean people would see the CBL name a lot more than it has previously.

“As a public company we’ll get a little bit more attention. We need to communicate a lot with shareholders and public shareholders so that will change to some extent. We will be under a continuous disclosure regime where we have to inform the market all the time so people will see the CBL name a lot more than it has in the past.”

CBL’s listing is the first listing to happen under the new Financial Markets Conduct Act. It will trade under the tickers CBL.NZX and CBL.ASX.

CBL’s offer price of NZ$1.55 implies a market capitalisation of NZ$340.5 million, reflecting a FY2016F P/E multiple of 8.4 and an implied gross dividend yield of 4.9% for the 12 month forecast period to 31 December 2016.

Authorities rule on cause of MH17 crash, complicating insurance coverage
Last year's tragic loss of civilian airliner Malaysia Airlines Flight 17 was the result of a missile warhead launched by pro-Russian separatists in Eastern Ukraine, Dutch authorities said this week.

The warhead exploded outside the cockpit, bringing down the aircraft and killing all 298 passengers and crew members aboard.

Dutch Safety Board chairman Tjibbe Joustra, who headed the investigation, said none of the aviation parties involved in the attack — including Ukrainian authorities who left the dangerous airspace open — "recognised the risks posed to civil aviation by the armed conflict on the ground."

And while many are still reeling by the confirmation of the long-expected report, insurance professionals are now dealing with a new issue. Given that officials believe the jet was “blown out of the sky,” who will be left to pay for the loss of the plane?

The issue at hand is a “wartime exclusion” often included in aviation hull and liability policies, which may negate coverage for the jetliner. Dr. Robert Hartwig of the Insurance Information Institute noted that separate “war risks” coverage fills in the gaps here, but it not yet known if Malaysia Airlines holds such a policy.

That leaves the tricky situation on the Ukraine-Russian border up to interpretation.

The key issue is whether an area of conflict will trigger the wartime exclusion despite no official declaration of war. Experts differ in their opinion, with some believing the war clause will apply, eventually adding up to liability costs of up to US$1 billion.

Rick Roberts, vice president of the Risk and Insurance Management Society (RIMS), took a more positive view.

“I’m not aware that there’s any coverage for an act of war, anywhere around the world,” Roberts told reporters.

In that case, a war exclusion would be moot and the airline would get its payout.

“There hasn’t been a war declared, and that knocks down the exclusion,” he added. “Unless Russia has declared war on Malaysia, that would knock out the exclusion. Based on the early facts it falls out of both of those categories.”

The only thing hedging up the way is a possible act of terrorism, which must be certified.

Other factors complicating coverage includes the Malaysian government’s ownership of Malaysia Airlines. Some experts believe that depending on how the policies were written, it could entitle the government to seek damages from the governments of Russia or Ukraine in an international court.

Furthermore, given the cause of the attack, families of victims may be more likely to file legal action. Indeed, attorney Jerry Skinner (who is representing those families) urged clients not to agree to a new settlement offer from Malaysia airlines, which would give them a share from an RM10 million fund — or roughly US$10,000 each.

Calling the offer "the dirtiest thing [he's] ever seen," Skinner explained that families who accepted the donation may be asked to repay Malaysia Airlines thanks to an indemnity clause in which they agreed to insure the company against further claims by others.

Under the terms of the aviation insurance Montreal Convention, the airline owes compensation payments of around US$183,000 per person. Family members who wish to sue for larger amounts must do so within two years of the crash.